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  1. #1
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    Help with setting up loan payments

    I tried setting up a loan wherein I am receiving payments. I receive a fixed $100 twice per month at 6% interest. I don't care about the number of years I just want it to calculate the balance after payment and move on. I don't do this on any regular basis so it is not working out for me. I tried the "loan calculator" and that is not working out. thank you.

  2. #2
    WS Lounge VIP sdckapr's Avatar
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    The Balance at any moment of time
    = Previous Balance * (1+6%/24)-100
    = Previous Balance *1 .0025 - 100

    6%/24 = (6% annual interest) / (24 payments/year)
    Steve

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    thank you for helping. I think its working.

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    I'm not sure how this works. It looks like you gave me two options. I elected to use the 2nd because it worked but I don't see in the formula how it's working.

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    (1+6%/24) is 1.0025

  6. #6
    WS Lounge VIP sdckapr's Avatar
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    I only gave 1 option. I just presented the calculations 2 way to show where they come from. The amount owed increases by 6% every year, so increases 6%/24 each "Half-month" [=1 + 6%/24 = 1.0025] and it decreases $100 every 2 weeks (-100).

    Steve

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    OK, I understand that. Can you tell me what the 1 means and the 1.0025? thanks.

  8. #8
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    The interest is 6%/24 (6% per year divided by 24 payments per year).
    That rate applies to the principal (multiplied by). Rather than take P * 6%/24 and then ADD P to the interest, you want 100% of the existing principal + the interest. So, 1+.0025 is 1.0025. Hope this helps.

  9. #9
    WS Lounge VIP sdckapr's Avatar
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    The 1 is about the "current" the 1.0025 is the current+ interest
    The Balance at any moment of time
    =(Previous Balance) + (Increase from Interest) - Payment

    The Payment was stated at $100 twice per month (=24 times per year)

    The Increase from Interest must be calculated. It is equal to the (Previous Balance) + 6% Ann Interest.
    With payments twice/month you have 24 payments / year which means that at each payment period the increase due to interest is 6%/24 = 0.06/24 = 0.0025
    So the Increase from Interest = (Previous Balance) * 0.0025

    Putting it all together
    =(Previous Balance) + (Increase from Interest) - Payment
    =(Previous Balance) + (Previous Balance) * 0.0025 - 100

    Rearranging:
    =(Previous Balance) * [1 + 0.0025] - 100

    = (Previous Balance) *1.0025 - 100

    Steve

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